US ECONOMY & POLITICS

Manufacturing Growth in U.S. Eases as Supply Chain Issues Linger – Bloomberg, 11/1/2021

• Persistent supply chain challenges continued to weigh on U.S. manufacturers in October, lengthening supplier delivery times and bloating a measure of inventories.
• The Institute for Supply Management’s gauge of factory activity fell to 60.8 from 61.1 in September, according to data released Monday. Readings above 50 indicate expansion. The median projection in a Bloomberg survey of economists had called for 60.5.
• ISM’s gauge of supplier deliveries rose to a five-month high in October, indicating longer lead times faced by producers for raw materials.
• That’s also contributed to a sharp rise in the group’s inventory index, which swelled to its highest level since 1984. The gauge also captures growth in work-in-progress inventories and challenges distributing finished goods.
• The average lead time for materials used in the production process rose to 96 days in October, the highest in data back to 1987. Average lead time for supplies used for maintenance, repairs and operations climbed to 49 days, also a record.
• Meantime, new orders eased, which helped to slow the pace of backlog growth. While ISM’s measure of production was little changed, the bookings gauge dropped to 59.8, its weakest level since June of last year.
• Materials costs continue to climb. A gauge of prices paid rose to a three-month high of 85.7 in October.

Biden Plan Gathers Steam as Feuding Democrats See Path to Vote – Bloomberg, 11/1/2021

• President Joe Biden’s economic agenda appears on track for passage by Congress even as Democrats are still skirmishing over lingering differences on a $1.75 trillion social-spending plan.
• House Democratic leaders are pushing hard to get that package finalized, with votes on both that bill and a smaller infrastructure plan this week — the latest in a string of self-imposed deadlines. The Senate, which already approved the public-works bill, is likely to vote on the larger package later in the month.
• A House Democratic leadership aide said Sunday that progress had been made on several of the outstanding issues, including drug pricing, but that a Monday Rules Committee meeting that would have prepared the bill for a Tuesday floor vote was postponed.
• The White House outline detailed nearly $2 trillion worth of tax hikes to fund a $1.75 trillion package, giving Democrats some wiggle room to scale back some of the levy increases.
• The measures have yet to be scored by the Joint Committee on Taxation, Congress’s non-partisan tax scorekeeper, so the estimates could change — causing Democrats to search for more revenue if the official projections fall short of the administration’s expectations.

Construction spending unexpectedly falls in September – Reuters, 11/1/2021

• U.S. construction spending unexpectedly fell in September amid declines in outlays on both private and public projects.
• The Commerce Department said on Monday that construction spending dropped 0.5% after edging up 0.1% in August. Economists polled by Reuters had forecast construction spending gaining 0.4%.
• Construction spending increased 7.8% on a year-on-year basis in September. The government reported last week that gross domestic product increased at a 2.0% annualized rate, stepping down from the April-June’s robust 6.7% pace.
• Spending on private construction projects decreased 0.5% in September after falling 0.3% in August. Outlays on residential construction dropped 0.4% after nudging up 0.1% in August.
• Single-family homebuilding spending declined 0.6% and outlays on multi-family housing projects slipped 0.3%.
• Investment in private non-residential construction like gas and oil well drilling fell 0.6% in September. Spending on structures declined for a second straight quarter in the July-September period, led by commercial and healthcare structures.
• Spending on public construction projects tumbled 0.7% in September after increasing 1.2% in August. Outlays on state and local government construction projects fell 0.4%, while federal government spending plunged 4.3%.

Covid-19 Pushed Many Americans to Retire. The Economy Needs Them Back. – Wall Street Journal, 11/1/2021

• The Covid-19 pandemic has boosted retirements among baby boomers, further straining the tight labor supply and leaving a hole for employers to fill.
• The Federal Reserve Banks of Kansas City and Dallas are among the groups tracking the growth in retirees.
• The share of the population in retirement from February 2020 to April this year was higher by 1.5 million people than it would have been if the 2019 retirement trend had continued, according to the Dallas Fed.
• A higher share of workers without a college degree retired before the traditional retirement age of 65 compared with those who had a college education, according to the Retirement Equity Lab.
• The lab’s analysis of census data found that retirement rates for those ages 55 to 64 without a college degree rose by 0.8 percentage point from 2019 to 2021, compared with a decline of 0.6 percentage point for similarly aged workers with a degree.
• About 38% of workers aged 62 and older and in the lowest third of weekly earnings no longer held jobs in the fourth quarter of 2020, up from 28% in the second quarter of 2019, according to the analysis from Geoffrey Sanzenbacher, a research fellow at the center.
• Among similarly aged workers in the highest third of weekly earnings, 22% weren’t working during the fourth quarter of 2020 compared with 18% in the second quarter of 2019.

EUROPE & WORLD

China’s Manufacturing Activity Contracts for Second Straight Month – Wall Street Journal, 11/1/2021

• A contraction in China’s factory activity worsened for a second straight month in October, adding evidence that growth momentum has weakened as the country’s vast manufacturing sector is weighed down by soaring raw material costs, a widespread power crisis and a sharp slowdown in the property sector.
• China’s official manufacturing purchasing managers index dropped to 49.2 in October, according to data released Sunday by the National Bureau of Statistics, lower than September’s 49.6 reading and the lowest since the outbreak of the pandemic in February 2020.
• The recent jump in commodities prices pushed the subindex for output to 61.1 in October from 56.4 in September, hitting the highest level since 2016, when the data was first published.
• Since September, China has been dealing with power rationing and blackouts, partly the result of aggressive energy-efficiency targets set by Beijing and aimed at reaching peak carbon emissions before 2030.
• Exports, a key engine of the country’s economic rebound following the coronavirus outbreak, also showed softness in October, according to Sunday’s data release.
• A subindex measuring new export orders rose to 46.6 in October, improving slightly from September’s 46.2 but still remaining deep in contraction territory.
• The new orders subindex, however, dropped further from the previous month to 48.8 in October.
• The nonmanufacturing PMI came in at 52.4 in October, versus 53.2 in September, while the subindex tracking the services sector declined to 51.6 in October from 52.4 in the previous month.

China Locks 30,000 Visitors Inside Shanghai Disneyland After One Guest Got Covid-19 – Wall Street Journal, 11/1/2021

• Shanghai Disneyland was temporarily shut down from Sunday after a visitor was found to be Covid-19-positive, underscoring the economic disruption businesses in China face as the country strives to stamp out infections.
• Shanghai Disneyland was required to test almost 34,000 people Sunday before visitors could leave the resort, after a woman who had attended the park a day earlier was found to be infected with Covid-19.
• Sunday’s visitors all tested negative but were ordered to self-isolate for another 24 hours before a second test.
• The park and Disneytown, a shopping and dining complex, will be closed until at least Wednesday, Shanghai Disneyland said.
• The world’s most populous nation has committed to maintaining “zero tolerance” for the virus despite criticism from business groups, a close to 80% vaccination rate, and a world which is gradually learning to live with Covid-19.

Chinese Developer Yango Group Proposes Bond Swap to Avoid ‘Imminent’ Default – Wall Street Journal, 11/1/2021

• The extreme dislocation in the market for junk bonds of Chinese companies has put another developer on the brink of default.
• On Monday, Yango Group asked international investors to swap $747 million of dollar debt for new bonds, blaming a shutdown of its usual financing channels for the cash crunch.
• The Shenzhen-listed Yango Group said the exchange was part of its efforts to “improve our liquidity, preserve options to stabilize our operations as a going concern, and avoid imminent payment defaults and potential holistic restructurings of our debts and business operations.”
• It is offering to exchange three sets of bonds for new debt due September 2022 with a 10.25% coupon. Investors will also get $25 in cash for every $1,000 in face value of bonds they exchange.

U.K. Job Market May Be ‘Alarmingly Tight,’ Budget Official Says – Bloomberg, 11/1/2021

• The U.K labor market may be “alarmingly tight” and could stoke wage pressures, Office for Budget Responsibility member Charlie Bean told lawmakers.
• In testimony to the House of Commons Treasury Committee, Bean said the Bank of England would have little choice but to raise interest rates if the end of the furlough scheme does not bring more workers into the jobs market.
• BWith vacancies running at a record high, a shortfall of workers will drive up pay. The OBR, the government’s fiscal watchdog, estimates there were around 200,000 people on furlough who are now looking for jobs, following the end of the wage-subsidy program on Oct. 1.
• Unless labor shortages ease, Bean warned, the cost of servicing the national debt could rise by 30 billion pounds ($41 billion) a year if inflation peaked at 5.4% and interest rates hit 3.5%.

Factmonster – TODAY in HISTORY

• The Republic of Turkey was proclaimed under Mustafa Kemal Ataturk. (1923)
• The New York Stock Exchange crashed on Black Tuesday, precipitating the Great Depression. (1929)
• Israel invaded the Egyptian Sinai Peninsula during the Suez Canal crisis. (1956)
• European leaders signed the European Union’s first constitution. (2004)
• Hurricane Sandy smashed into the eastern seaboard of the U.S., killing 117 people in the U.S. and 69 in Canada and the Caribbean. The storm caused about $50 billion in damage in the U.S. (2012)